Where the Rocky road leads next

Northern Rock's shareholders will have some sport today throwing brickbats at their board of directors, but elsewhere events move on. Ron Sandler, still wearing the halo earned during his time at Lloyd's of London, has been lined up as chairman of a nationalised Northern Rock. As significantly, the Treasury has, we understand, finally reached a conclusion about how the bank should be placed into public ownership - and how a price would be put on the shares.

This development is interesting. For the first time in this saga, we are getting a glimpse of how the nuts and bolts of the act of nationalisation would work - which suggests the government is not bluffing and is prepared to take the radical step.

The surprise is that the obvious method of tipping Rock into administration, and then offering the administrator a nominal sum to tow the business away, is close to being rejected. The Treasury is worried that savers' deposits would be frozen at the moment of administration and that securing legal ownership could take too long.

Nor will the Treasury propose any deal that could be blocked by shareholders - their mood is too militant. Instead, trading in Northern Rock shares would be suspended and parliament would vote on a nationalisation bill. The odd bit is how the price would be set - an arbitration panel would be appointed to determine the "fair" value of Northern Rock shares, which presumably would be somewhere between the market price and zero.

A seat on this panel sounds like a job from hell, but arbitration has the (slight) advantage for the government of giving the appearance of arms-length dealing. It won't stop the lawsuits from aggrieved hedge funds, but it may confuse the confrontation.

There is still a chance of a miracle - a last-minute private-sector solution - but the Treasury appears resigned to its tough decision.

Flaky on gold

Traders in the London bullion market are apparently agreed: gold is going to $1,000 an ounce. It could happen - gold has gone only one way for the past five years - but the assumptions behind the rise looks increasingly flaky at these elevated levels.

The big assumption is that gold is a hedge against inflation. It is, but only up to a point. Returns are measly if you take a multi-decade view. In real terms, the price would have to double to match the level seen in 1980 when Soviet tanks rolled into Afghanistan.

Bulls look at that statistic and argue there is still a long way for the price to go yet. Bears conclude that the art of making money from gold is timing - so buying in 2002, when the market was obsessed by the threat of deflation, was a cute move. The current obsession is inflation, so gold, as a perceived store of permanent value, has done well.

But two other factors lie behind gold's rise. One is the decline in value of the US dollar, the currency in which it is traded - looked at in euros, say, the gains are less impressive and any strength in the dollar (admittedly hard to see right now) would be a negative.

The other is the ease with which investors can trade gold. Exchange-traded funds have widened the pool of investors enormously. Much of the new money has come from momentum investors, who hang around only until a bend appears in the trend. May $1,000 be the moment? You never know, but, when everybody agrees a certain price is inevitable, it's probably wise to be cautious.

Talking Hands

Guy Hands is providing excellent entertainment with his running commentary on goings-on at EMI, but why is he doing it?

Hands has always been one of the more chatty members of the private-equity brigade, but he never used to be quite so vocal, even when he entered high-profile arenas such as pubs and trains. At EMI, he is going well beyond any new industry requirement for greater transparency. He looks like a man on a crusade.

Maybe that's what the music industry needs but, blimey, the stakes are rising. On the eve of the announcement of 1,500 job losses, Hands said that "when the market thinks we overpaid the most, we make most of our money". No points for tact there.

Investors in Hands's Terra Firma, having seen the headlines about Radiohead quitting and Robbie Williams going on strike, will be relieved to learn that their top man is so confident. The net effect, though, is that in the space of a fortnight Hands has ensured that EMI is the deal he will be remembered for. Was that what he intended? Too late now.